The ongoing credit crunch has caused banks and finance companies to withdraw many of their mainstream products, and to tighten their lending criteria. As such, it should come as no surprise to learn that the vacuum left is now being filled by loan sharks who charge extortionate rates of interest (100% or more) to those who are desperate for credit.
The Times reports that debt campaigners have seen many clients forced to borrow at extortionate interest rates, because they have had their credit cards cut off or have been refused loans.
The Financial Services Authority (FSA) estimates that up to seven million people had difficulty gaining mainstream credit, and Citizens Advice reports that mortgage arrears problems had gone up by 35% in the first two months of 2008, compared with the same period last year. Citizens Advice bureaux said that they had dealt with 215,000 new debt problems in January and February.
The credit crunch is now adversely affecting the "man in the street". The Bank of England and Gordon Brown, who claim that the economy is sound and stable, need to wake up to the fact that people should not be placed in a situation where they are forced to borrow at "criminal" rates of interest merely to put food on the table.